Traders Bet 70% Probability of Bank of Korea Hiking Rates by 50 Basis Points Over Next Six Months
nashnova research
Korean won swap markets now price a roughly 70% probability that the Bank of Korea will raise rates by a cumulative 50 basis points over the next six months, and strategists warn the recent government-driven bond rally lacks a durable foundation.
What does a 70% rate-hike probability mean?
The won swap market — where traders bet on future interest-rate moves — now prices a 70% chance the BOK will raise rates by a cumulative 50bp over six months.
This means → the dominant market view is that the BOK is not done; the policy rate is likely heading from 3% toward 3.5%.
In plain terms = seven out of ten traders are betting on "two more hikes." This is not a fringe call — it is the market consensus.
Why is the recent bond rally suspect?
Korean bonds rallied earlier, with yields falling across the curve — but the driver was government intervention signals: authorities warned of action and cut October bond issuance by ₩5 trillion.
Strategists broadly view this rally as lacking a sustainable base. In plain terms = yields dropped not because fundamentals improved, but because the government leaned on the market — once the pressure lifts, yields snap back.
Gama Asset Management portfolio manager Rajeev De Mello expects the 10-year Korean government bond yield to climb back to around 4.6%, and the 3-year yield to rise from 3.98% to 4.1%.
What will the October and November meetings decide?
The BOK has raised rates at two consecutive meetings, bringing the benchmark to 3%. Its August dot plot — an internal vote showing each board member's rate expectation — put 10 of 21 dots at 3.25%.
Hana Securities strategist Park Junwoo expects the BOK to hold in October and hike in November, at which point yields should peak.
He is explicit: "Now is not the time to buy." But if the 3-year yield returns above 4%, it becomes worth re-entering. Hana Securities is currently underweight both Korean and US bonds.
What tools does the government still have?
Buoyed by a semiconductor-sector tax windfall, Finance Minister Lee Hyoung Il said the government may further cut planned bond issuance and could launch emergency buyback operations.
This means → the government's willingness to intervene remains a buffer — but it is a floor, not a reversal. Until the hiking cycle ends, intervention can slow the rise in yields but cannot stop it.
LS Securities analyst Woo Hye-young argues that waiting until the November dot plot to buy Korean bonds "won't be too late," and expects yields to decline by year-end.
市场有风险，内容仅供研究参考，不构成投资建议。